India to infuse USD 430 Mn in its fund of funds scheme

VC funds have until now managed to disburse money to 240 startups and create 28,500 jobs with the help of the scheme.

Mar 14, 2019 by The Passage Team

The Indian government is set to pump in Rs 3,000 crore (USD 430 million) into its flagship startup fund, two people familiar with the matter told Economic Times. “Disbursements have taken off,” said an official with knowledge of the fund’s activity.

In 2016, Prime Minister Narendra Modi had launched a Rs 10,000-crore startup fund named Fund of Funds, which is managed by Small Industries Development Bank of India (SIDBI). The fund house makes investments in different VC funds, which in turn invest in startups.

According to data from the government, VC funds have managed to disburse money to 240 startups and create 28,500 jobs. Till now, they have raised commitments of Rs 9,000 crore and are in talks to further raise Rs 16,680 crore from long-term partners.

Last year in April, Department of Industrial Policy and Promotion (DIPP) had blamed SIDBI for slow disbursement of funds under the Startup India’s Fund of Funds Scheme (FFS). The government has since made amendments for the startup ecosystem to be more inclusive and make funds easily accessible.

It relaxed norms for the long-hanging sword of angel tax, which had resulted in investors and entrepreneurs receiving tax notices. The government has also broadened the definition of startups to include companies that have been operating for 10 years.

SIDBI has committed funds to several alternate investment funds (AIF), which will further deploy them to startups. Last year in July, SIDBI committed Rs 200 crore under FFS to four AIFs — Omnivore Partners India Fund 2, TVS Shriram Growth Fund 3, IQ Alpha III and Capaleph Indian Millennium SME Fund. Similarly in January this year, it committed Rs 200 crore to three AIFs — Bharat Innovation Fund, JM Financial Fund II and North Eastern Venture Fund.

Other fund houses such as Pi Ventures, Unicorn India Ventures Fund I, Ankur Capital Stellaris Fund, Menterra Social Impact Fund I and Endiya Seed Co-Creation Fund have also received funds from SIDBI.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.